4 Ways HR Management Is Different for Small Business - woman putting sweater on a mannequin

4 Ways HR management Is different for small business

Monday, December 01, 2014
For many small businesses, human resources (HR) functions are ad-hoc and happen quickly,  from addressing a customer complaint to onboarding a new hire. A performance review can oftentimes feel rushed with, "You're doing a good job. I'm giving you a 2% raise." There never seems to be enough time to devote to HR management.
Finding time for HR management is a struggle for many small businesses. Many can't afford a full-time HR professional, and yet it is difficult to attract and retain employees without one.  

What HR challenges do small businesses face?

Small business owners may wonder how to find the time to complete HR functions. They don't have access to unlimited resources. Unlike large organizations, they do not have funds to invest in people and programs. Many small companies don't even have an HR department. So, how can they compete with large corporations?

First, small businesses need to understand the changing economic landscape that creates HR challenges for small businesses. They need an HR strategy that leverages their differences while addressing the following challenges:

Increased legislation

Changes in the world's health due to the COVID-19 pandemic have added legislation related to employee health and rights. For example, the Families First Coronavirus Response Act (FFCRA) requires employers to: 

  • Provide up to two weeks of paid sick leave at the employee's regular rate if the employee is quarantined or experiencing symptoms.
  • Provide up to two weeks of paid sick leave at two-thirds of the employee's regular rate to care for an individual in quarantine or care for a child because child care facilities are closed.
  • Provide up to ten additional weeks of paid expanded family and medical leave at two-thirds of the employee's regular rate to care for a child because child care facilities or schools are closed.
Although many such requirements do not apply to small businesses, in this case, only employers with less than 50 employees may ask for an exemption. 

Businesses need to stay current on HR-related legislation to ensure they are in compliance. However, staying up-to-date on employment laws can be time consuming. Business owners may want to consider outsourcing these efforts to HR professionals.

Shrinking talent pool

Attracting and retaining employees has always been a challenge for small business owners. They may not have the financial resources to pay top dollar for talent, and few can match the benefits or perks of larger organizations.

Recent changes in the labor market have made attracting new employees even more challenging. Many dissatisfied employees who have quit their jobs have been slow to re-enter the workforce. They are taking their time to find a job that is a better fit for their needs. This shift has created labor shortages, resulting in fewer qualified applicants.

Small businesses could capitalize on the changing attitudes and attract more candidates. They could offer more opportunities for people looking to contribute or who want more input on projects. However, HR strategies have more to do than just attract talent; they need to retain it. 

Establishing sound HR practices can help retain employees. Companies need to establish strong onboarding processes and maintain an ongoing employee development program. With the right set of HR tools, organizations can engage and retain employees to overcome this challenge.

Confusing company culture

Every organization has a culture. There's the culture that owners think they have, and then there's the culture that the employees work in. When these two cultures differ, you run the risk of new employees having difficulty integrating into the workplace and existing employees becoming frustrated. 

Ideally, business owners have built a workplace culture that reflects their values. They have articulated their expectations to the workforce, so every employee knows their performance standards. When companies have a clear culture, they give employees a roadmap for how to represent the organization.

More employees are heavily considering the work environment or company culture when looking at job opportunities. They want to ensure they are working for a company that shares their values.  

Employee handbooks can help set the tone for a company's culture. They don’t have to be stuffy and impersonal. In fact, they can be fun as long as they contain pertinent and relevant information such as employment laws and benefits.

Understanding employee benefits

Small businesses need to explore benefits to learn what employees really want. They should not assume that what big corporations offer is what employees are looking for. Studies show that today's employees are focused on:

  • Flexible work options
  • Better ways to measure productivity
  • Diverse and inclusive coworkers
What’s great is that these are things that smaller organizations can accommodate.

However, smaller companies need to look at the cost of providing such benefits. How will meetings be handled if employees are allowed to work from home three days a week? If you decide on Zoom meetings, do you have the bandwidth to support that? These are considerations that could easily be understated, but in fact have a significant impact on employee satisfaction.

The same holds true for 401K plans. The cost is more than employer matching. Payroll has to be updated to take out the required amounts. Paperwork must be manually filed and accounts set up. Again, these are administrative functions that accounting can absorb, but could also have a negative impact on operations.

HR management systems are designed to help organizations fulfill their HR responsibilities through efficient and effective processes. It doesn't matter how small the entity or large the corporation. HR management is an essential part of the future workplace.

How is HR management different for small businesses?

For small businesses, HR management is a company-wide responsibility. It's not relegated to a single individual or department. Usually, a business owner is responsible for HR issues which is why HR-related issues often get pushed to the back of the to-do list. There's always a more pressing issue. 

Instead of ignoring HR practices due to other priorities, small businesses should leverage their differences to create an environment that attracts and retains employees. Here are four ways that HR management is different for small businesses, and ways in which small companies can capitalize on their size.

Distribute HR responsibilities

Anyone who has worked for a smaller organization knows that job descriptions are guidelines. Employees often step up to complete a task when no one else can. Suppose a new safety protocol needs to be implemented. As part of the compliance, employees must attend an hour training class, and new signage is needed for the factory floor. 

In a large company, HR managers would be responsible for the protocol, training, and signage. However, in a small company, someone in the factory would most likely be responsible for the protocol. The same person might even conduct the training, or another employee may take on that task. Accounting or bookkeeping personnel would order the signage, and administrative staff would ensure everyone was trained. The factory foreman would put up the signage. 

Distributing the tasks means that no one person is burdened with extra work. Instead, the added work is spread among several people, making for a more collaborative effort that leads to team building interactions among participants. Why not leverage the need for multiple people into a respectful building exercise that enables employees to listen to and encourage each other?

With a human resources management system (HRMS), small business owners can meet compliance requirements. They can turn an HRMS into a central location where HR information is stored and accessible. 

Accessible organizational structure

Small businesses rarely have enough employees to make a traditional organizational hierarchy work. With fewer managers, employees have direct access to management, which makes for more transparency – another attribute of a respectful workplace. Unfortunately, as businesses scale, they often increase in middle management and lose that accessible structure.

An article in Harvard Business Review reported on a study of six Finnish companies that kept a flat organizational structure, focusing on self-management and empowerment. They were able to maintain that accessibility through technology and culture.
  • Technology. Companies look to technology to enable coordination and transparency. For example, systems such as an HRMS allow employees to access the system if they need to lookup or update information. If they want to know vacation days or holidays, they can log in and get the information. No need to email the HR team asking for the information.
  • Culture. Companies often lose their originating culture. As more people join the company, they forget to focus on the ideas and values that built it. Small businesses need to ensure that their onboarding includes stories that build a unifying identity.

Small businesses may not have the resources for dedicated HR employees, but they can leverage their accessible structure to create a strong identity that fosters employee engagement. Such openness leads to transparency and mutual respect within an organization.

Personalized HR

Hiring in a small business can be a company-wide effort. Without a dedicated HR department as with a large business, multiple employees may be involved in recruiting, selecting, and onboarding a new hire. However, the hiring process is a potential candidate's first impression of a company and should be carefully managed.

If small businesses want to retain employees, they need an HR strategy that starts with the hiring process and ends with an exit interview. Businesses will likely find it difficult to recruit and retain the best employees without a plan. Plus, turnover is costly and can quickly eat away at profits.

For example, the Society for Human Resource Management (SHRM) suggests that the average replacement cost for salaried staff is six to nine months of the person's salary. An employee making $60,000 per year would cost a company between $30,000 and $45,000 to replace. However, the cost can vary significantly depending on the position. As an example,

  • $1,500 for hourly employees
  • More than 100% of an employee's salary in a technical position
  • Over 200% for C-suite positions
Because multiple people may perform HR services in small businesses, they should establish an HR team that ensures consistent onboarding, employee training, and appraisals. New employees can have personalized training and mentoring to make them as productive as soon as possible.

Plus, this personalized touch gives the new hires and existing employees opportunities to get to know each other. In turn, the interactions help develop a collaborative environment where communication and teamwork is encouraged. 


Finding creative ways to do existing tasks can lead to innovation. In today's economy, innovation is survival. With limited resources to devote to HR management, small businesses have to be creative to compete for top talent. They have to learn to do more with less or risk losing qualified applicants for open positions.

Ongoing training and career development are crucial for employee retention. Employees see these opportunities as a company's willingness to invest in their employees. If small businesses do not have resources to pay for outside training, they should look at internal resources to conduct training. Sometimes, it may be less expensive if an outside instructor comes to the business rather than sending multiple employees to the same course.

Asking employees about their onboarding experiences can reveal areas that need improvement. At the same time, owners can encourage employees to provide ideas that could make the onboarding process more productive, efficient, and useful. Practicing innovation in HR management provides a platform for other functions within an organization to creatively solve problems.

Meeting HR management challenges

Although both small businesses and larger enterprises face similar challenges in HR management, how they address them differs significantly. Small companies have to be more innovative in their approach. They can leverage their smaller size to offer a more personalized experience for each employee. With the flexibility of smaller organizations, they can meet the HR management challenges such as attracting and retaining talent.

With the right technology, organizations can deliver quality HR services with less disruption to operations. They can remain in compliance with existing employment laws and evaluate the financial impact on company benefits. Finding a partner to help with payroll and HR management may be the right approach to ensure success for your small business.

Ready to utilize an HRM system at your small business? 

Heartland is ready to help. 

Heartland is the point of sale, payments, and payroll solution of choice for entrepreneurs that need people-powered technology to sell more, keep customers coming back, and spend less time in the back office. Nearly 1,000,000 entrepreneurs trust Heartland to guide them through market changes and technology challenges so they can stay competitive and focus on building remarkable businesses instead of surviving the daily grind. Learn more at heartland.us.